4 ms·

I read somewhere that Bershire Hathaway had sort of finished it's mission. 40 years ago there were lots of large companies who were very 'inefficient' and BH w

I read somewhere that Bershire Hathaway had sort of finished it's mission. 40 years ago there were lots of large companies who were very 'inefficient' and BH would come along, invest a lot, and start demanding changes. Company performance would improve and BH would make big $$$$. Now there are few of these and it is hard to do. I don't know enough to know whether it is right or wrong. but I think that is what I read.

WorkerBee28474 10mo ago
Berkshire had a pivot where, decades back, Munger convinced Buffett to switch from investing in bad companies at a great price to good companies at a good price. Their new strategy is still active. That said, the turnaround 'mission' you mention about still happens, but is more associated with private equity than Berkshire.
- beambot 10mo ago
  They also have a history of buying good private companies at a good price and then let the management keep cooking. This is especially relevant to family businesses that want liquidity for the heirs and good long-term (indefinite) stewardship rather than selling to some PE vulture that will destroy their legacy.
- Tycho 10mo ago
  Not quite right. The pivot was from good companies at a great price to great companies at a good price (unless you can get a great price, but that’s unlikely). Over the long run the latter is a better and more scalable strategy.
chrishare 10mo ago
Well, many companies are still mispriced, but stock markets today look a lot more like voting machines than weighing machines - so it takes more time to be proven right (or wrong).
manquer 10mo ago
Isn't that the model of every private equity? It was always hard to do well. Although it doesn't seem that way, there are lot of companies that have become large recently, it is best time ever historically for companies to be able to grow large quickly much more so than 50 years ago in the early days of BH. There are 1000+ unicorns today, about 50 of the fortune 500 are founded > 2000, a large number of companies that have chosen to remain private with revenues in excess of >$10B like Stripe or SpaceX etc While it is true that lot of the action has been in sectors BH has never been comfortable holding large assets in such as SaaS, new fin-tech(i.e. crypto etc), or gig econ(Airbnb/Uber etc), social media(tiktok et al.) etc, that doesn't mean the principles are no longer needed or there aren't opportunities to take stake in these now mature companies and drive value.
tim333 10mo ago
That wasn't their main thing. The main one was to buy stocks or companies for less than they were worth, either because the market mispriced them or because company owners wanted to retire and sell to Berkshire. They also were big into insurance float which is getting insurance premium money that doesn't have to be paid out for a while which provides a kind of free leverage. Buffett did a lot of other things too.
- bigthymer 10mo ago
  I think over the last few decades, he could make deals just because the Buffett name held so much influence. If Buffett was investing, then others could assume that the company won't go bankrupt.
  - hn_throwaway_99 10mo ago
    That's certainly part of it, but in the "buying mispriced assets" category, Buffer made some very smart, large bets. During the Great Financial Crisis, BH made a $5 billion investment in Goldman Sachs that eventually made them billions in profit when everyone else was running for the hills.
    - bigthymer 10mo ago
      I actually think this is a deal only Buffett could have made. By bringing on Buffett as an investor, it sent a signal to the market that the bank was solvent and improved confidence in the company. Another investor would not have brought the same calm so would not have had the same return even if they bought the same amount at the same time.
applesauce2 10mo ago
Seems inaccurate to me. What I've heard is that BRK is famous for being hands-off. Their management team is too small anyway to have done much micromanaging.
- tome 10mo ago
  Correct. Berkshire only buys well-functioning businesses. '“Turnarounds” seldom turn'. https://www.berkshirehathaway.com/letters/1979.html https://www.berkshirehathaway.com/letters/1979.html

WorkerBee28474 10mo ago

Berkshire had a pivot where, decades back, Munger convinced Buffett to switch from investing in bad companies at a great price to good companies at a good price. Their new strategy is still active. That said, the turnaround 'mission' you mention about still happens, but is more associated with private equity than Berkshire.

beambot 10mo ago
They also have a history of buying good private companies at a good price and then let the management keep cooking. This is especially relevant to family businesses that want liquidity for the heirs and good long-term (indefinite) stewardship rather than selling to some PE vulture that will destroy their legacy.
Tycho 10mo ago
Not quite right. The pivot was from good companies at a great price to great companies at a good price (unless you can get a great price, but that’s unlikely). Over the long run the latter is a better and more scalable strategy.

chrishare 10mo ago

Well, many companies are still mispriced, but stock markets today look a lot more like voting machines than weighing machines - so it takes more time to be proven right (or wrong).

manquer 10mo ago

Isn't that the model of every private equity? It was always hard to do well. Although it doesn't seem that way, there are lot of companies that have become large recently, it is best time ever historically for companies to be able to grow large quickly much more so than 50 years ago in the early days of BH. There are 1000+ unicorns today, about 50 of the fortune 500 are founded > 2000, a large number of companies that have chosen to remain private with revenues in excess of >$10B like Stripe or SpaceX etc While it is true that lot of the action has been in sectors BH has never been comfortable holding large assets in such as SaaS, new fin-tech(i.e. crypto etc), or gig econ(Airbnb/Uber etc), social media(tiktok et al.) etc, that doesn't mean the principles are no longer needed or there aren't opportunities to take stake in these now mature companies and drive value.

tim333 10mo ago

That wasn't their main thing. The main one was to buy stocks or companies for less than they were worth, either because the market mispriced them or because company owners wanted to retire and sell to Berkshire. They also were big into insurance float which is getting insurance premium money that doesn't have to be paid out for a while which provides a kind of free leverage. Buffett did a lot of other things too.

bigthymer 10mo ago
I think over the last few decades, he could make deals just because the Buffett name held so much influence. If Buffett was investing, then others could assume that the company won't go bankrupt.
- hn_throwaway_99 10mo ago
  That's certainly part of it, but in the "buying mispriced assets" category, Buffer made some very smart, large bets. During the Great Financial Crisis, BH made a $5 billion investment in Goldman Sachs that eventually made them billions in profit when everyone else was running for the hills.
  - bigthymer 10mo ago
    I actually think this is a deal only Buffett could have made. By bringing on Buffett as an investor, it sent a signal to the market that the bank was solvent and improved confidence in the company. Another investor would not have brought the same calm so would not have had the same return even if they bought the same amount at the same time.

applesauce2 10mo ago

Seems inaccurate to me. What I've heard is that BRK is famous for being hands-off. Their management team is too small anyway to have done much micromanaging.

tome 10mo ago
Correct. Berkshire only buys well-functioning businesses. '“Turnarounds” seldom turn'. https://www.berkshirehathaway.com/letters/1979.html https://www.berkshirehathaway.com/letters/1979.html